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Post 28 Sep 2017, 3:01 pm

http://www.businessinsider.com/trump-tax-plan-details-corporate-rate-individual-brackets-deductions-cuts-2017-9

This may be early, because it's certainly gonna look different, still, I've got to say I don't hate it, but I've got questions, and I do hate one piece of it:

First, the piece I hate: eliminating taxes paid as a deduction. If you want to get rid of an unnecessary deduction, get rid of the mortgage interest deduction. All that does is make residential real estate more expensive! And help make banks money. If you live overseas, currently you've got pay US taxes, but you get to deduct taxes you paid as a credit, so you only pay US taxes if they are higher than where you are. It gets the folks in Bermuda hard, but not the people in London, who are already paying lots of taxes. This will make it nearly impossible to live overseas in a civilized country.

(To say nothing of what it will do to those living in high tax cities and states.)

I also wonder if you divorce the corporate tax rate significantly from the personal tax rate, which is what appears to be happening, how do you prevent owners of closely held corporations from using their corporation as a tax shelter? It's the first thing that popped into my head.

But there's a lot of good in there too, though the details will be important.
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Post 29 Sep 2017, 6:05 am

Geo:
If you live overseas, currently you've got pay US taxes, but you get to deduct taxes you paid as a credit, so you only pay US taxes if they are higher than where you are. It gets the folks in Bermuda hard, but not the people in London, who are already paying lots of taxes. This will make it nearly impossible to live overseas in a civilized country.


You don't have that right in that Trump's proposal does not change the treatment of foreign taxes materially. Most people who have foreign earned income have an exemption on the income for US tax purposes. For people who pay foreign taxes, the vast majority take a credit INSTEAD of a deduction. This is a red herring -- the Trump proposal doesn't significantly impact living overseas.

Geo:
I also wonder if you divorce the corporate tax rate significantly from the personal tax rate, which is what appears to be happening, how do you prevent owners of closely held corporations from using their corporation as a tax shelter? It's the first thing that popped into my head.


However, if you want to get the money out of the corporation you would need to pay a dividend resulting in double taxation. So, it is not a good tax shelter in that you would incur more taxes, not less. There are also anti abuse rules in the existing code on this sort of thing.
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Post 29 Sep 2017, 7:12 am

Ray Jay wrote:Geo:
If you live overseas, currently you've got pay US taxes, but you get to deduct taxes you paid as a credit, so you only pay US taxes if they are higher than where you are. It gets the folks in Bermuda hard, but not the people in London, who are already paying lots of taxes. This will make it nearly impossible to live overseas in a civilized country.


You don't have that right in that Trump's proposal does not change the treatment of foreign taxes materially. Most people who have foreign earned income have an exemption on the income for US tax purposes. For people who pay foreign taxes, the vast majority take a credit INSTEAD of a deduction. This is a red herring -- the Trump proposal doesn't significantly impact living overseas.


Oh, that's good. Thanks for the correction.
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Post 29 Sep 2017, 7:29 am

What do you think of the tax plan?
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Post 29 Sep 2017, 8:46 am

You don't cut taxes when you're in a recovery. Period. It will add 2.2 trillion to the deficit over ten years. Anything done with taxes now should be reform--not cutting taxes. If you want to cut corporate taxes you need to off-set that somewhere else.
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Post 29 Sep 2017, 8:48 am

Also California and New York are getting screwed. New York estimated that a family of four making 75K would pay $1,800 in higher taxes. This is due to not being able to deduct for paying state and local taxes. How's that for a tax cut?
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Post 29 Sep 2017, 9:17 am

Good Points:

1. Lower corporate tax rate from 35% to 20% will result in increased economic activity. US companies have been leaving to Canada, Ireland, etc.
2. Simplification is good.
3. One time corporate repatriation tax will bring money into US.
4. Lowering individual tax rates from 39.6% to 35% is a positive.
5. Getting rid of Bush era special deduction for manufactures is good.

I can see both sides of the debate on deductibility of state taxes. Perhaps a compromise is possible?
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Post 29 Sep 2017, 11:49 am

freeman3 wrote:Also California and New York are getting screwed. New York estimated that a family of four making 75K would pay $1,800 in higher taxes. This is due to not being able to deduct for paying state and local taxes. How's that for a tax cut?


So, is it your position that Florida, Texas, and Nevada should subsidize California and New York?

In other words, low-tax States should take a hit to help out high-tax States?

Isn't that the essence of it?
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Post 29 Sep 2017, 11:53 am

geojanes wrote:If you want to get rid of an unnecessary deduction, get rid of the mortgage interest deduction. All that does is make residential real estate more expensive!


1. Won't that cause the real estate market to nosedive, resulting in many in the middle class getting hosed?

2. Won't it result in rental properties either raising their rents or getting dumped?

I guess I wonder with this so a part of the investment/taxation scheme, wouldn't it wreak havoc to eliminate it?
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Post 29 Sep 2017, 12:11 pm

Nah, I don't buy the argument that low-tax states are subsidizing high-tax states. You have income. The federal government should only be taxing you on you have after deductions for state and local states. The federal government should not tax you on income that you did not actually receive...because it was taken out for state and local taxes. You're looking at it on some global state basis, whereas it should be looked at from the individual's perspective. And anyway California already pays more in taxes than it gets back so how on earth are we getting subsidized!

http://www.politifact.com/california/ar ... t-gets-dc/

Personally, I believe you should get a deduction for any interest payments, mortgage related or not.
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Post 29 Sep 2017, 12:37 pm

Personally, I think corporations should be taxed at the same rate as individuals. BUT they should get an off-set for taxes paid by investors when they receive dividends and and for capital gains taxes paid on sale of their stock.
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Post 29 Sep 2017, 12:54 pm

freeman3 wrote:Nah, I don't buy the argument that low-tax states are subsidizing high-tax states. You have income. The federal government should only be taxing you on you have after deductions for state and local states. The federal government should not tax you on income that you did not actually receive...because it was taken out for state and local taxes. You're looking at it on some global state basis, whereas it should be looked at from the individual's perspective. And anyway California already pays more in taxes than it gets back so how on earth are we getting subsidized!

http://www.politifact.com/california/ar ... t-gets-dc/

Personally, I believe you should get a deduction for any interest payments, mortgage related or not.


Your first argument defeats itself. Essentially, yes, low-tax States are subsidizing the high-tax States--based on your statement: "The federal government should not tax you on income that you did not actually receive...because it was taken out for state and local taxes."

So, the higher the State and local taxes are, the less you have to pay in Federal income tax. In other words, more of your income is shielded, thus you are getting subsidized.

As to the latter, it's not really clear. From your link:

Jon Coupal, president of the Howard Jarvis Taxpayers Association, said the LAO report is a fair representation.

"I think the LAO report is fairly accurate," Coupal said. "Their ultimate conclusion that it’s about a dollar in for a dollar out, we think is probably accurate within the margins for what we can measure."


It sure looks fairly even.
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Post 29 Sep 2017, 1:02 pm

freeman3 wrote:Personally, I think corporations should be taxed at the same rate as individuals. BUT they should get an off-set for taxes paid by investors when they receive dividends and and for capital gains taxes paid on sale of their stock.


And I think everybody should be taxed at the same rate.

Perhaps corporations should be taxed at the same rate as an individual making 30K a year...
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Post 29 Sep 2017, 1:34 pm

Doctor Fate wrote:So, the higher the State and local taxes are, the less you have to pay in Federal income tax. In other words, more of your income is shielded, thus you are getting subsidized.
It will be marginal though, and when you consider that CA is a net contributor to Federal taxes, is clearly less of a factor than other "subsidies".
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Post 29 Sep 2017, 1:52 pm

danivon wrote:
Doctor Fate wrote:So, the higher the State and local taxes are, the less you have to pay in Federal income tax. In other words, more of your income is shielded, thus you are getting subsidized.
It will be marginal though, and when you consider that CA is a net contributor to Federal taxes, is clearly less of a factor than other "subsidies".


It is arguably a "net contributor." The numbers are too close to call.